Daniel Knowles, Tax Expert

Responding to the UK Uncut protests on Saturday, Daniel Knowles had a go at explaining why those who are outraged at Barclays paying only 2% of its profits in corporation tax are ‘missing a more subtle point’. You see, says Knowles, coming over all sophisticated:

Now let’s assume that these bankers are busy allocating capital in efficient ways and so doing their bit for the common good. You might think that they are mostly making their money by shaking down listed companies, or engaging in other forms of complicated chicanery. But, as I say, let’s assume for the moment that it is a good idea to have a vast, and vastly wealthy, financial sector. And let’s leave aside the absurd logic of claiming that businesses should somehow be able to take the income tax of their employees, VAT and national insurance into consideration in debates about corporation tax. (You try pointing out on your tax return how much you generate for the exchequer in these ways)

The ‘real question’, Knowles tells us, is whether it is ‘worthwhile’ trying to make companies pay more corporation tax. His answer is an emphatic ‘no’. Multinationals are ‘very sensitive’ about corporation tax and if we try to increase the amounts they pay they will only skip abroad, like Kraft did when it bought Cadburys. Rather than increase corporation tax for big businesses, we should reduce the corporation tax paid by small and medium sized businesses, says the worldly wise Knowles.

But, are the protesters really missing something subtle but significant here? Are they being a bit silly – entranced by the glamour of Polly Toynbee’s support, perhaps (‘It must have been like a royal visit!’ chortles the Telegraph blogger and wit).

The short answer is, no.

While it is currently possible for large companies with a global reach to minimise their corporation tax bills through the use of the offshore system, there is a simple remedy, proposed by Richard Murphy among others, called country-by-country accounting. Murphy outlines what it is and the advantages it offers here. If companies were obliged to give a transparent account of the profits they make in each separate tax jurisdiction their offshore arrangements would cease to make much difference. If a company didn’t like having to pay the same rate of corporation tax as their smaller competitors in a given territory, they would be free to cease trading in that country. I am sure that many small and medium companies would leap at the chance to replace them, and to become bigger in the process.

Britain is a wealthy country. It has enormous human capabilities and vast material resources – a transport, energy and communications infrastructure that cannot be relocated to Switzerland or the Cayman islands; brilliant and motivated people who love living here and are not about to skip off to somewhere with boringly predictable warm weather or a national cuisine that doesn’t have decent tea and curry.

If large companies want to do business here they must contribute to our considerable common wealth. If not, in the words of Oliver Cromwell:

You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!

Doubtless Mr Knowles thinks such talk simplistic or lacking in subtlety. We will have to muddle along without his support.